Liquidity, resiliency and market quality around predictable trades: Theory and evidence

• 成果类型: Article
• 署名作者: Bessembinder, Hendrik; Carrion, Allen; Tuttle, Laura; Venkataraman, Kumar
• 署名单位: Arizona State University; Arizona State University-Tempe; Utah System of Higher Education; University of Utah; U.S. Securities & Exchange Commission (SEC); Southern Methodist University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2016.02.011
• 发表日期: 2016
• 页码: 142-166
• 关键词: Predatory trading; Sunshine trading; Resiliency; ETFs; trading costs; Commodity trading

摘要

We extend the theory of strategic trading around a predictable liquidation by considering the role of market resiliency. Our model predicts that even a monopolist strategic trader improves market quality and increases liquidator proceeds if trades' temporary price impacts are quickly reversed, and that competition among strategic traders strictly improves market quality. We provide related empirical evidence by studying prices, liquidity, and individual account trading activity around the large and predictable roll trades undertaken by a large exchange-traded fund (ETF). The evidence indicates narrower bid-ask spreads, greater order book depth, and improved resiliency on roll dates. We find that a larger number of individual trading accounts provide liquidity on roll dates, and do not find evidence of the systematic use of predatory strategies. On balance, the theory and evidence imply that traders supply liquidity to rather than exploit predictable trades in resilient markets. (c) 2016 Elsevier B.V. All rights reserved.